McKes­son joins health IT ven­ture cap­i­tal field

Modern Healthcare - - NEWS - By Dar­ius Tahir

Health­care gi­ant McKes­son Corp. plans an ag­gres­sive move into ven­ture cap­i­tal fund­ing for health­care tech­nol­ogy, plan­ning to com­mit sev­eral hun­dred mil­lion dol­lars over the next five to eight years and hir­ing a VC in­dus­try veteran to head its VC ini­tia­tive.

McKes­son’s un­der­tak­ing joins a crowded field of cor­po­rate ven­ture cap­i­tal firms in­vest­ing in health­care and dig­i­tal health. Qual­comm Ven­tures is the most ac­tive cor­po­rate dig­i­tal in­vestor, said Stephen Kraus, a part­ner at Besse­mer Ven­ture Part­ners. Merck & Co. and Blue Cross and Blue Shield also have ac­tive health­care funds.

McKes­son’s ven­ture cap­i­tal arm will invest in 15 to 25 com­pa­nies over the next two to three years, said Tom Rodgers, McKes­son’s new man­ag­ing di­rec­tor for strate­gic ven­ture cap­i­tal op­er­a­tions. The company, which had $137.6 bil­lion in rev­enue in 2014 and of­fers a wide range of soft­ware, dis­tri­bu­tion and business ser­vices to health­care clients, al­ready has made one undis­closed in­vest­ment.

Rodgers and his team will fo­cus on startups in four ar­eas: di­rect-to-con­sumer prod­ucts such as decision-support soft­ware for pa­tients; al­ter­na­tive care-de­liv­ery meth­ods such as house calls and tele­health; em­ploy­er­en­abled health­care fo­cused on well­ness or get­ting em­ploy­ees to use health­care more ef­fec­tively; and data an­a­lyt­ics, par­tic­u­larly soft­ware that helps doc­tors man­age data from wire­less sen­sors and so­cial me­dia.

The com­mit­ment sug­gests McKes­son may be­come one of the most ac­tive dig­i­tal health in­vestors over­all. Ac­cord­ing to data from health­care ac­cel­er­a­tor Rock Health, the most ac­tive in­vestors have made seven deals through the third quar­ter of this year.

Cor­po­rate ven­ture funds have his­tor­i­cally had a mixed rep­u­ta­tion in Sil­i­con Val­ley. Kraus said cor­po­ra­tions have of­ten hired the wrong tal­ent, re­ly­ing on in­ter­nal fi­nance or business de­vel­op­ment staff rather than ex­pe­ri­enced ven­ture cap­i­tal­ists.

Rodgers ac­knowl­edged that “most cor­po­rate ven­ture firms fall well short of their prom­ise.” He in­tends to build an in­ter­nal team to ac­tively as­sist firms postin­vest­ment, help­ing com­pa­nies to es­tab­lish re­la­tion­ships with McKes­son clients.

“Build­ing a company in health­care can be a slow, painful process,” Rodgers said. “It may take eight to 12 years for th­ese com­pa­nies to reach ma­tu­rity and grow into what their value should be.”

Health­care business con­sul­tant Lisa Suen­nen said the en­try of McKes­son and other cor­po­rate VC fun­ders comes at a wel­come time be­cause many tra­di­tional in­vestors are fad­ing away. “This cap­i­tal has filled the big black hole left in health­care by the exit, demise, or zom­bie state of so many ven­ture funds,” she said.

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